Interest on wrongly availed Cenvat credit is payable even if the credit was never utilised before reversal.

Rule 14 of the Cenvat Credit Rules, 2004 treats wrongly taken or wrongly utilised credit as recoverable with interest, and does not distinguish between mere wrongful availment and wrongful utilisation for interest liability on reversal. The earlier Rule 57-I(5) of the Central Excise Rules, 1944 operated in a different statutory context tied to fraud, suppression, collusion or intent to evade duty, so precedent under that rule was not applicable. The Tribunal decision relied on was also factually distinguishable, and dismissal of an earlier special leave petition did not confirm that view. Interest was therefore payable on wrongly availed Cenvat credit even though it remained unutilised until reversal.

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Issues: Whether interest is payable on Cenvat credit wrongly availed and later reversed, even when the credit remained unutilised till reversal.

Analysis: Rule 14 of the Cenvat Credit Rules, 2004 provides for recovery of credit taken or utilised wrongly, together with interest, and applies the recovery machinery under sections 11A and 11AB of the Central Excise Act, 1944. The provision does not draw a distinction between wrong availment and wrong utilisation for the purpose of interest liability at the time of reversal. The earlier Rule 57-I(5) of the Central Excise Rules, 1944 operated in a different statutory setting, being tied to fraud, wilful misstatement, collusion, suppression, or contravention with intent to evade duty, and the precedent based on that rule was therefore not applicable. The dismissal of the special leave petition in the earlier matter did not amount to confirmation of the Tribunal's view. The relied-upon Tribunal decision was also distinguishable on its facts.

Conclusion: Interest was payable on the wrongly availed Cenvat credit notwithstanding that it had remained unutilised until reversal; the challenge failed.

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